President Obama hedged on the following promise:

"I will eliminate capital gains taxes for the small businesses and the start-ups that will create the high-wage, high-tech jobs of tomorrow." — 8/28/08, Denver

"Barack Obama understands that small businesses are the engines of our economy, and he will eliminate all capital gains taxes on investments in small and start-up firms." — Barack Obama's Comprehensive Tax Plan

UPDATES:

Updated: February 26, 2009

Stimulus reduces but does not eliminate

Deep within the text of the humongous economic stimulus bill — more formally known as the American Recovery and Reinvestment Act of 2009 — lies a small bit of text that changes capital gains taxes for small business.

When you sell an asset for a profit, that profit margin is your capital gain, and the IRS taxes you on it. Capital gains taxes vary depending on the income level of the tax filer and the length of the investment.

The stimulus bill address the case of people who make money after they've invested in a small business. Currently, these investors are able to exclude 50 percent of their gain from capital gains taxes when they invest in small business, as an incentive to entrepreneurship. The stimulus bill raises that exclusion to 75 percent.

The reduction is not everything Obama said he would do, but it's a substantial portion of what he sought, so for now we're going to rate it Compromise. If if the capital gains taxes are further reduced on small businesses, in we might need to change our rating.

Sources:

Thomas, The American Recovery and Reinvestment Act of 2009 , Sec. 1241

Eliminating capital gains taxes for small businesses will do more than just encourage people to invest in those businesses, it will also lead to more opportunities for the business owners to create new jobs in hopes of growing their business. Basically, the new investor money would likely be put towards the payroll budget, thus creating new job openings. For example, say a small business based out of St. Louis has 30 employees and pays those employees through an online payroll system. If the capital gains tax is eliminated then that would offer a possible higher return on investment for investors to put their money into the small business. This influx of new investment would allow the business to increase the budget of its St. Louis online payroll which would, in turn, offer more opportunity for the St. Louis based company to add to its 30 employees it currently has. Eliminating this tax could prove to be helpful in spurring job growth in small businesses.